In article <
[email protected]>,
"StaceyJ" <
[email protected]> wrote:
> Qui si parla Campagnolo wrote:
>
> >
> > As bike shop owner, I would say have them do the whole enchilata...but
> > we don't get sweated up if somebody wants us to build them, brings us
> > the hubs and rims. BUT if ya buy complete wheels, have a wheelbuilder
> > go through them doing tension, true, dish, round and stress relieve.looks
> > pretty good
> > right now.
>
> I'm curious about something...I've looked into the economics of bike
> shop ownership (a foolish retirement dream of mine), and it seems that
> the margins on hard goods are almost nil...likely even lower on parts
> that are special ordered. In light of that, it seems that it would
> almost be preferable if someone would come in strictly for service
> (from my understanding, where the real money is). Does this ring true
> (even a little)?
I'm no bike shop owner, but I've never let a lack of expertise stop me
from saying something
.
The margins on bikes are pretty awful. I think most shops sell them
primarily as entrees to accessory and future service work, and because
bike shops genuinely want to put people on bikes. Lots of businesses
work this way: stores that sell video games get nearly nonexistent
margins on the actual consoles, at least for the first few months after
release.
Maintenance parts are probably sold at healthy margins, more or less.
Nothing out of line with normal retail. Web retailers can be all over
the place on the pricing of this stuff, but I think the fact that most
people don't want to wait a week for their repair parts to arrive helps
protect the retail margins for the average LBS.
Hot new stuff, be it the latest suspension fork or the most desireable
set of new wheels or whatever, commands high prices and high margins. Or
at least it should.
Run-of-the-mill accessories are a hard business. I suspect reasonable
margins at most bike shops, but they're competing against mail-order
bulk purchasing power and the closeouts of last year's models.
The key here is whether a particular item has been commodified. Generic
700c wheels are available for very little online, generic bikes are
available for even less, and Nashbar will sell you an aluminum road
frame for $120.
The existence of that Nashbar frame doesn't prevent a ton of
manufacturers from getting premium prices, be it because they are
bespoke frame builders like Richard Sachs or because they have built a
premium name in the market like Bianchi or Cannondale.
Similarly, commodity wheels are cheap, but Zipp 303s still cost a pile,
and hand-built wheels are priced to pay for the labour costs and a
reasonable parts margin. Even lowly parts like headsets can be
de-commodified if you're Chris King and you can maintain brand identity,
which is a pretty good trick for two aluminum forgings, two commodity
bearings, a top cap and some nice silk-screening.
Bike shops can sell themselves in a lot of different ways. Becoming the
local source of expertise on a particular type of bike is a good way,
becoming a high-volume retailer with a good relationship with key
suppliers makes sense, getting a reputation for peerless mechanical work
or good service is fine, and you'll probably have to keep your costs in
control.
If I had to take a guess at the problem with bike shops, I'd say that
besides the fact that online bike bit sources have eliminated a good
chunk of LBS business, they also suffer from the same problem as
restaurants: it's a sexy business that attracts a fair number of
innocents who don't have the wit or talent to run their shop as a
business. This can mean everything from having an unattractive
storefront to bad cash control to not understanding the local market.
It's a drag on the business both because these bad LBSs go out of
business (or struggle along forever as accidental non-profit
operations), and because they cause some havoc for more sensibly run
shops, both as they struggle, and as they go out of business, the latter
being one of my favorite times to bargain hunt.
I don't think most shops can make a go by being the physical outlet for
10 wholesaler's catalogs and three bike lines, and I think the
successful local shops around here all go beyond that basic, poor-margin
business in one key way or another.
--
Ryan Cousineau
[email protected] http://www.wiredcola.com/
"I don't want kids who are thinking about going into mathematics
to think that they have to take drugs to succeed." -Paul Erdos
